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US car firms make new funds plea

Detroit-based firms to reveal restructuring plans to US congress as crisis continues.

02 Dec 2008 23:37 GMT

Car sales in the US have slumped [EPA]

Ford on Tuesday asked for a nine billion dollar "standby" loan to prevent it from running short of cash in 2009 but says it probably will not need the money, while Chrysler said it needed an emergency loan or it could go out of business.

And GM said it needed $12 billion in government loans to keep operating, tellingCongress in a report that its collapse could have "severe, long-term consequences to the US economy."

The Senate committee is to hold an emergency hearing on the subject onThursday and Friday, where the firms' executives are to appear.

Ford also said its plan calls for cost savings with unionised workers and was currently in discussions with the United Auto Workers union.

It was also planning an investment of $14 billion over the next seven years to improve fuel efficiency through the development of new technologies and products and would sell its five corporate jets.

Finally, if granted the loans Alan Mulally, the firm's chief executive, said in a statement he would work for a salary of one dollar a year "as a sign of his confidence in the company's transformation plan and future".

US stocks rose by 270 points, or 3.31 per cent, on Tuesday, with the Dow Jones Industrial Average closing at 8,419.09 points.

Poor sales

The auto industry's so-called "Big Three" firms, which employee thousands of Americans, have been hit hard by the US's current financial crisis and have faced criticism for failing to restructure their companies and for being out of touch with consumers' needs.

Last month auto company executives failed to persuade US congressional members to provide them with the $25 billion in government loans.

Nancy Pelosi, speaker of the House of Representatives and Harry Reid, the US senate majority leader, both Democrats, ordered them to outline major changes, including the elimination of lavish executive pay packages and assurances that taxpayers would be reimbursed for the loans.

All three companies reported grim sales figures for November on Tuesday, with Chrysler suffering a huge 47 per cent slump in sales while GM's November US sales fell 41 per cent and Ford's dropped 31 per cent.

Company criticism

On Tuesday the White House said it remained unconvinced that the three firms should be granted the additional loans.

"We are sticking to our guns that the companies have to prove that they are viable before the taxpayer dollars should be given to them," White House spokeswoman Dana Perino told reporters.

Several Democrats have demanded that the White House and US treasury provide the funds from the US government's $700 billion finance industry bailout to support the automakers.

However they have resisted, saying the senate should allow the industry to use $25 billion in already existing US energy department loans.

The firms' chief executives were heavily criticised after their original appearance before Congress when it emerged they had travelled to Washington DC on three separate private jets.

However for the latest hearings Mulally is travelling from Detroit to Washington by car, as is Rick Wagoner, chief executive officer of GM.

Robert Nardelli, head of Chrysler, will also no longer travel by private jet, his spokesman told AP.